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Cash Flows (5) Projecl Co -1,000 3,600 -4 bIN C2 СЗ 1,300 1,800 1,8cic 1,800 1,10%0 1,800 1.800 1,800 1 8D0 a. If the opportunity cost of capital is 10%, which pro ct(s) have a positive NPV? Positive NPV projectis) ● Project ProjectB Project C Projects A and B Projects A and C Projects B and C Projects A, B, and C No project b. Calculate the payback period for each project (Round your answers to 2 decimal places. IT a project never pays back, enter O) Project A 1 yearfs) 2 yearfs) 3.89 yearís) Project C c. Which projectis) would a firm using the payback rule accept if the cutoff perlod were three years? Projectis) accepted d. Calculate the discounted payback for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places. If a project never pays back, enter 0.) Projects A nd B Prcicct A Projecl B Project C 0 year(s 2.21 yeans) years》

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Answer #1

Calculate the NPV and Pay back period as follows:

A B Cummulative cash flow 2 Year Particulars A 3600 1800 1800 1800 1800 1800 -$163.64 S3,223.42 -1800 1800 -1800 -3600 1800 01 Cash flow 1 Cash flow 2 Cash flow 3 Cash flow 4 Cash flow 5 Cash flow NPV -4500 -2700 1600 -1600 200 2000 4500 1800 1100 1800 1800 S392.54 1800 3600 5400 10 a Proiects B and C has positive NPV 12 b 13 с 14 15 16 | Year PVF @ 10% Particulars A 17 18 19 20 21 Pav back period Project A and B has pay back period less than three years 1.00 2.00 3.89 Pv of cash flows Cummulative cash flow 1 Cash flow -1800 -3600 -4500 1800 3600 -4500 2 0.826446281 Cash flow 3 0.751314801 Cash flow 4 0.683013455 Cash flow 5 0.620921323 Cash flow 10.909090909 Cash flow 1636.363636 1636.3636361636.363636-163.6363636-1963.636364-2863.636364 -327.2727273-1863.636364 1309.090909-1863.636364 2945.454545 -227.2727273 4581.818182 1409.090909 4.14 이 1636.363636 0 1636.363636 01636.3636361636.363636 이 1636.363636| 1636.363636 1000 23 d Discounted Pav back period 0.00 2.20

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